Date Requested:February 14, 2013
Time Requested:02:02 PM
Agency: State Tax & Revenue Department
CBD Number: Version: Bill Number: Resolution Number:
2013R1270 Introduced HJR23
CBD Subject: HOMESTEAD EXEMPTION INCREASE
FUND(S)
General Revenue Fund, local governments
Sources of Revenue
General Fund,Other Fund Local Property Tax revenu
Legislation creates:
Neither Program nor Fund

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

    The stated purpose of this resolution is to increase the homestead exemption from $20,000 to $35,000. The bill also provides for seniors who earn less than three times the poverty level, that their exemption shall be the greater of the first $35,000 of assessed valuation of any real property or fifty percent of the average home sale price in the county where the residence is located. The resolution also provides that the exemption may not exceed the average home sale price in the entire state for the five years immediately preceding the assessment.
    
    The bill proposes an amendment to the West Virginia Constitution increasing the Homestead Exemption from $20,000 to $35,000. The increase in the Homestead Exemption from $20,000 to $35,000 would result in a revenue loss of $25.0 million annually for local levying bodies and an increase of $880,000 in General Revenue Fund collections. The number of senior citizens is expected to grow by nearly 37 percent over the next decade. Homestead Exemption costs will rise in similar fashion over the next decade.
    
    The bill also provides that the Homestead Exemption shall be the greater of the first $35,000 of assessed valuation of any real property or fifty percent of the average home sale price in the county where the residence is located for seniors who earn less than three times the poverty level. The impact of this portion of the proposal on State and local property tax revenue cannot be determined.
    
    In most counties, decreased tax revenue due to an increase in the Homestead Exemption would likely be at least partially offset by higher tax rates and tax burdens on other types of property, including both real property taxes and personal property taxes on vehicles, business inventory, machinery and equipment.
    
    There would be a one-time cost of $20,000 to the State Tax Department. Additional administrative costs to the State Tax Department or local governments cannot be determined. Administrative costs for local county assessors will increase as they seek information from taxpayers on their income to determine the level of individual Homestead Exemption.

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2013
Increase/Decrease
(use"-")
2014
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 0
3. Explanation of above estimates (including long-range effect):
    The increase in the Homestead Exemption to $35,000 would result in a loss of $25.0 million in local property tax revenue. General Revenue Fund collections would increase by $880,000 million as the $100,000 decline in State property tax revenue would be offset by a gain in Personal Income Tax collections. As the level of the Homestead Exemption rises, the number of taxpayers who owe property taxes on their home declines. Therefore, the cost of the refundable property tax credit against Personal Income Tax liability for lower income households would also decline.
    
    The estimates for increasing the Homestead Exemption to $30,000 are based upon the assumption of no tax rate changes on the part of county commissions, municipalities and voters. In most counties, decreased tax revenue due to an increase in the Homestead Exemption would likely be at least partially offset by higher tax rates and tax burdens on other types of property, including both real property taxes and personal property taxes on vehicles, business inventory, machinery and equipment. Twenty county commissions, numerous municipalities (e.g. Charleston), and thirty-four school boards (excess levies) currently impose tax rates below their allowed constitutional caps. Some of these authorities may raise tax rates to partially offset any local revenue loss.
    
    The bill also provides that the Homestead Exemption shall be the greater of the first $35,000 of assessed valuation of any real property or fifty percent of the average home sale price in the county where the residence is located for seniors who earn less than three times the poverty level. The impact of this portion of the proposal on State and local property tax revenue cannot be determined.
    
    There would be a one-time cost of $20,000 to the State Tax Department. Additional administrative costs to the State Tax Department or local governments cannot be determined. Administrative costs for local county assessors will increase as they seek information from taxpayers on their income to determine the level of individual Homestead Exemption.


Memorandum
Person submitting Fiscal Note:
Mark B. Muchow
Email Address:
Roger.D.Cox@wv.gov
    The stated purpose of this resolution is to increase the homestead exemption from $20,000 to $35,000. The bill also provides for seniors who earn less than three times the poverty level, that their exemption shall be the greater of the first $35,000 of assessed valuation of any real property or fifty percent of the average home sale price in the county where the residence is located. The resolution also provides that the exemption may not exceed the average home sale price in the entire state for the five years immediately preceding the assessment.
    
    The proposed amendment initially increases the amount of the assessed valuation of property subject to the Homestead Exemption from $20,000 to $35,000. The amendment then provides under a proviso a higher exemption that is determined solely on a needs basis. It appears that the requirement is fulfilled if only one owner has federal AGI that is equal to or less than 300% of the federal poverty level.
    
    Because of the terminology, rather than using the first $35,000 of assessed valuation, the property owner can choose to use as the amount of the exemption 50% of the average home sale price for the five years immediately preceding the assessment in the county where the residence is located. However, the bill does not indicate how the average home sale price is to be determined.